The “Great Resignation” refers to the large spike we are seeing in 2021 of people either leaving their jobs or considering leaving. According to the US Department of Labor1, four million people left their jobs in April alone. Microsoft2 did a global survey of their employees and 41% of workers stated they were considering either quitting or changing professions entirely.
There are a multitude of reasons why people leave their jobs, whether that is financial, emotional, or for more upward opportunities. For the purposes of this blog, I’m not going to dive into each reason. But fun fact, according to Forbes3, the average employee that stays with their employer can expect a 3% annual raise, while changing jobs will generally get you a 10%-20% increase in pay. I want to focus on a few key items that you and your family need to consider while making that transition.
Healthcare Coverage & Providers
You’ve accepted a new job offer. Now what?
One of the first things you are going to want to do is dive into your new employer’s healthcare options. You are going to want to compare the types of plans offered, ensure your current providers are in-network, compare monthly premiums (cost to you), compare deductibles (the amount you must pay before coverage kicks in), and determine if there is a waiting period.
There are several types of healthcare plans that could be offered, but the usual three are Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), and High-Deductible Health Plan (HDHP). Each one of these has their pros and cons. It really depends on your personal situation to determine which one makes the most sense.
After figuring out which type of plans are offered, you are going to want to contact your primary care physician to ensure they are considered “in-network” with your new insurance provider. I would recommend doing this with any/all doctors you see regularly. Don’t forget about your dentist and eye doctor!
Monthly premiums and deductibles have an inverse relationship meaning if you have low monthly premiums, you most likely have a high deductible and vice versa. As stated above, determining which plan, monthly premium, and deductible amount really is a case-by-case situation. I would recommend discussing this with your financial planner.
The final item to dive into is what is called a waiting period. This is the amount of time you must wait before your new health coverage begins. Health insurance waiting periods can range anywhere from 30 to 90 days. The issue here is you may have a gap in coverage between the time that you lose your old health insurance and when your new health insurance waiting period is over.
If you have a gap in coverage there are two options. The first is COBRA, which is a continuation of your current employer coverage, but you must pay both the employee premium and the part that your employer was previously paying. The second option is to apply for an Affordable Care Act (ACA) plan. Whether you choose COBRA or an ACA plan, it is important to not have a drop in coverage as an emergency visit without health insurance can be financially devastating.
Employer Retirement Plans
One of the most common things I see when doing data gathering with clients is discovering they have an old 401(k) account that they completely forgot about. It might be from 10 years ago and has been just sitting there with no one ever noticing. So how do you not lose track of these accounts when you are changing jobs? You have two options.
The first option is to rollover your old employer retirement account to an IRA or into your new employer account. You can always do the first option of rolling into an IRA without any restrictions, but you will need to check if your new employer plan allows outside funds to enter the plan to complete the second option. Your HR department should be able to answer this.
If you are single and make more than $140,000 per year or are married and make more than $208,000 per year, something to consider would be to rollover your old employer account to your new employer account. The reason for this is because it may allow you to utilize a strategy called “Backdoor Roth Contributions”. If this applies to your situation, I would recommend discussing it with your financial planner.
While rolling over your employer plan there’s a possibility that the amount you are going to receive is different than the balance listed on the website. The most likely reason for this is because many employer contributions or matching contributions have a vesting schedule. There are three types of vesting schedules: immediate, graded, or cliff. The amount of employer contributions you receive upon leaving will completely depend on how long you’ve been with that employer and what type of vesting schedule they use. Don’t be surprised if you don’t receive the balance listed on your last statement. This may be something to consider while comparing job opportunities.
Other Benefits & Cash Flow
There are many other ducks to get in a row when changing jobs including figuring out your paid time off and holiday schedule, updating beneficiaries on life insurance, ensuring you have proper disability coverage, and other small discretionary benefits. But I think the last important one to review and update is cash flow. Starting a new job is a perfect prompt to review where you are spending your dollars.
You should be asking yourself questions such as, “Am I spending my dollars on things that I value most? Is there anything financially that’s felt like a burden that I can now tackle?” Also, if your new role came with a pay increase you should be thinking about where this increase in cash flow will go. Will it go to increasing lifestyle? To paying down debt? To saving for a down payment on a home? Or does it go to increasing or starting an investment account?
Fresh Start
Changing jobs is an exciting and stressful time for most people, and I completely understand that! I think the best way to handle the transition is to be proactive and not be afraid to ask questions or to ask for help. Look at the opportunity as a fresh start, not only personally, but financially.
Related: Planning for Your Philanthropic Desires
1 https://www.bls.gov/news.release/jolts.nr0.htm
2 https://www.forbes.com/sites/cameronkeng/2014/06/22/employees-that-stay-in-companies-longer- than-2-years-get-paid-50-less/?sh=5aa4347fe07f 3https://www.microsoft.com/en-us/worklab/work-trend-index